ICICI Bank shares gained 1.08% to ₹1,412 on the BSE following strong Q2FY27 results, while HDFC Bank declined 1.53% to ₹716.90 and Axis Bank fell 4.07% to ₹1,234. The Bank Nifty index was down 0.57%, with Axis Bank emerging as one of its top losers as investors assessed the September-quarter earnings of the three largest private sector lenders. The three lenders reported their Q2FY27 earnings on October 17, with each outperforming its peers on at least one key financial metric. ICICI Bank recorded the highest net interest margin (NIM) and the strongest growth in net interest income, while Axis Bank posted the fastest growth in net profit, supported by a decline in provisions and a favourable base effect.
ICICI Bank emerged as the strongest performer in Q2 FY27 with net profit growing 20.1% to ₹14,843 crore, beating estimates by 3.3%. The bank reported net interest income growth of 17.7% year-on-year, significantly outpacing peers. Axis Bank posted the sharpest profit rise at 37.6% year-on-year, though this benefited from a lower base as the bank had made a one-time provision related to priority sector lending in the year-ago quarter. HDFC Bank delivered modest 4.7% profit growth to ₹19,510 crore, with treasury operations supporting the performance. All three lenders reported sequential contraction in net interest margins, partly due to the mobilisation of foreign-currency deposits under RBI's FCNR(B) swap window.
All three lenders faced margin pressure due to foreign currency deposits under RBI's FCNR(B) swap window, with Axis Bank's NIM declining 11 basis points due to FCNR deposits alone. ICICI Bank's NIM fell to 4.18% in the September quarter from 4.36% in the June quarter and 4.30% a year earlier, while HDFC Bank reported a NIM of 3.32%. Axis Bank witnessed the sharpest contraction in NIM, falling to 3.36% from 3.46% in the previous quarter and 3.73% a year earlier. However, analysts expect margin recovery in coming quarters as banks deploy liquidity and the impact of higher funding costs eases. Sharad Avasthi from SMIFS expects treasury losses to be largely reflected in Q2 and Q3, with performance potentially improving from Q4.
Brokerages have maintained 'Buy' ratings on all three major banking stocks despite mixed performance. ICICI Bank leads with 53 'Buy' ratings from analysts, followed by Axis Bank with 49 and HDFC Bank with 47. Axis Bank shares came under greater pressure as investors weighed the lender's weaker performance on key operating metrics against its peers, despite healthy business growth, improved asset quality and lower operating expenses as a proportion of assets. The bank has continued to face pressure on its NIM, raising concerns about its ability to arrest the decline in core profitability. Axis Bank shares have gained up to 4% this year, while HDFC Bank has declined 26%. Nuvama retained its 'Buy' rating on ICICI Bank with ₹1,850 target, citing strong credit growth and expecting margins to recover from Q3 FY27. Systematix maintained its 'Buy' rating and raised target price to ₹1,750 from ₹1,700, noting that domestic NIM remained broadly stable.
ICICI Bank demonstrated strong asset quality improvement with gross NPAs declining to 1.20% from 1.38% in the previous quarter, while net NPAs improved to 0.30%. This improvement in asset quality, combined with core operating profit growth of 21.8%, suggests the results were driven by underlying business strength rather than one-off gains. ICICI Bank trades at 2.6 times book value compared with its historical average of 3 times, while Axis Bank trades at 1.8 times against its five-year average of 2.02 times. HDFC Bank trades at 1.8 times its price-to-book ratio, against its five-year average of 2.8 times. Nuvama expects ICICI Bank's RoA of 2.2-2.3% and RoE of around 17% over FY27-FY29, while Elara Capital notes that HDFC Bank's RoA of 1.7% and slow margin recovery remain challenges.
ICICI Bank shows strong technical support between ₹1,375 and ₹1,390, while ₹1,435 serves as key resistance level. The stock is being treated as an intraday opportunity within this range, with analysts recommending patience before considering positional trades. If the stock breaks above ₹1,435 and sustains that level, selling puts below ₹1,415 for October expiry becomes a consideration. However, failure to sustain above ₹1,435 would avoid positional trades, as the range between ₹1,375 and ₹1,435 offers better intraday opportunities than directional risk. The key trading principle emphasizes that fundamentals provide a firm foundation, while margin compression remains the principal concern that deserves close attention.
